Franchisee Sued Twice for Infringement: Who Bears the Compensation?

WISECODE Take

In a franchise dispute concluded by the Chengdu Intermediate Court on August 18, 2026, the court ruled that the franchisor must bear the full compensation of over 330,000 RMB paid by the franchisee to Ke Company due to improper guidance. This breaks the illusion of many franchisors that they can escape liability simply because franchisees are independent legal entities. The franchisor in this case collected a franchise fee of 39,800 RMB but continued to guide the franchisee to use the infringing Ken Gutou mark even after the Sichuan Free Trade Zone Court's initial infringement ruling. Under the Regulations on the Administration of Commercial Franchises, courts hold that the franchisor's duty of compliance guidance must match its commercial benefits. This implies that franchisors face joint liability if they provide flawed licenses, while self-operated businesses without franchise models remain unaffected. Zhidian provides Trademark Monitoring services to help franchisors screen potential risks before licensing. First, verify trademark registration before signing, not just pending applications. Second, ensure new designs undergo IP review during rectification to avoid repeat infringement. Brand licensing is like issuing financial products; if the underlying asset is flawed, the issuer must bear full responsibility for the investor's losses.